Credit scores, also called credit ratings, are a numerical representation of how well a person pays their bills. This score is usually assessed by looking at several factors such as age, total debt, and length of time in the country.
Credit scores are important because they influence how banks, insurance companies, and other lenders decide whether or not to give people credit.
Individuals with high credit scores can easily get a loan at a low-interest rate. The reverse is true for a person with a low credit score. Before we talk about credit scoring in Singapore, first, let’s talk about a few things you need to understand about credit scores.
Understanding Credit Scores
Credit scores are a summarised numerical representation of an individual’s bill payment algorithm. These scores are usually assessed by considering a few factors, such as age, total debt, and length of time in the country. The credit scoring system may vary for different countries depending on their policies and general standard of living. Here are a few things you need to know about Singapore’s Credit score system;
- Credit Score: Singapore’s credit scoring system ranges from 350-850. A person with a perfect 850 credit score will have an excellent rating and be able to borrow money easily.
- Factors Affecting Score: Factors that determine your Singapore Credit Score include the following: Total Debt, percentage Of Income Used To Repay Debt, Loan Repayment Period, Age of Account, Total Bankruptcies Within Last 5 Years
- Types Of Loans: Loans typically depend on the type of loan being applied for. For example, personal loans often require a good credit rating, while car loans typically don’t.
Now that you have gotten the general idea on credit scoring let us dial down and single out on the credit scoring system in Singapore.
The credit score system in Singapore
Singapore’s credit score system is a little different from what you may be used to. The lowest score that you can get in Singapore is 200, which is the same as a credit rating of the “Poor.” There are only three categories of scores: Excellent, Good, and Poor. Singapore does not have a Fair category like other countries do.
A person with a good credit score will have an easier time obtaining loans for homes and cars than someone with a poor credit rating. Generally, people with good credit scores are also eligible for lower interest rates on money they borrow.
It’s important to note that people with low income or who are unemployed may not be able to maintain a good credit score under Singapore’s system. This is so because they don’t have any consistent income or assets. In this case, you have the option to sign up for financing through financial institutions like banks or microfinance. These institutions will also take into account your social standing and occupation before extending any type of loan.
How is a credit score calculated?
There are 3 major credit bureaus in Singapore: TransUnion, Equifax and Experian. And as we already mentioned above, factors such as age, total debt and length of time in the country and social status are taken into consideration when calculating credit scores. However, there are a few main factors. However, there are a few main factors used in calculating credit scores.
- 3 main factors make up your credit score:
- The amount of debt you have
- How long you have been taking out loans
- Your past payment history
Now that you know the basics about how your credit score is calculated, it’s important to know what will affect your score and how exactly these factors affect your scores. If you have a good credit score and a low income, banks may be willing to lend you money without charging higher rates.
However, if you have a good income but a low credit score, then lenders might charge higher interest rates or refuse to give you any loans at all. On the other hand, people with lower incomes but high scores might get better rates and more leniency when borrowing money. It’s all about your credit scores.
Other factors that go into calculating your credit score
Credit scoring systems are designed to assess the creditworthiness of an individual based on several factors, as earlier mentioned. The Singapore Credit Bureau has six criteria that are used when assessing your financial soundness.
- Age: Individuals between 20-30 years old usually have a better score than those over 50 years old.
- Total Debt: Credit card debt is usually regarded as more harmful than personal loans or car loans.
- Length of Time in Singapore: If you’ve lived in Singapore for more than 4 years, then you’ll get a better score than someone who’s just moved here.
- Bankruptcies and Late Payments: If you have had a bankruptcy, then you would need to get a higher score than someone without this on their record. This would greatly implicate the consideration financial institutions give to you when applying for loans.
- Frequency of Usage: It’s important to understand how often one uses credit cards and what one use them for. If they’re using them too much, it will affect their score negatively.
- Disposable Income: Your income is a big factor when it comes to calculating your credit score because it shows how likely you can pay off debts given your current level of income.
How to improve your credit score.
To improve your credit score, you need to pay all of your bills on time and avoid getting new lines of credit. It’s important to note that the higher the amount of debt you have, the lower your score will be. Paying off any debts will also help improve your rating.
There are other ways to ensure you get good credit scores and to maintain them, one of them is by checking in with one of Singapore’s major credit bureaus at least once a year for an assessment of your current situation.
If you’re looking to start your own business, it’s time to learn more about credit scores. Credit scores are the numerical representation of how well a person pays their bills. They can be used to give people credit but also affect the interest rates that they get on loans. If you have a low credit score, then you’ll have a hard time getting loans and will have to pay higher interest rates. If you want your business to flourish, it’s important to find out your credit score and make any necessary changes before applying for loans.
- How do I get a copy of my credit report?
You can get a copy of your credit report from any of the above-mentioned Credit Bureaus.
- What should I do if someone stole my identity?
Identity theft is common in all societies. As a victim, you can get into a truckload of financial complications if things are not properly handled. Here is what you need to do; first, contact the police. Then you will need to contact the three major credit bureaus: Equifax, TransUnion, and Experian. You may have to pay for this service. But the police and bureau will see into the case, and your credit scores will be restored to you.
- Why should I care about my credit score?
A high credit score can help you get better rates on loans and lower insurance premiums. Plus, lenders are less likely to refuse lending to people who have a good credit score or provide them with higher interest rates than those with lower scores. A low or bad credit score means that banks are less likely to approve your application for loans or grant them at better interest rates than those with good scores.